That may change. Games are coming out for the iPad 2 that are full 1080p, 30fps, 16x9 that use the HDMI adapter into the large screen 1080p display of your choice. Apple doesn't have any movies yet in 1080p but it's speculated that will change with the iPad 2 out. At that point you will be able to download your movies barring any DRM issues.

Luckily, the new iPad 3 can play 1080p movies. And it is great to know
[h=3]New iPad 3 and new Apple TV 3 H.264 1080p HD Encoding 5X Faster Now[/h]bigasoft.blogspot.com/2012/03/new-ipad-and-new-apple-tv-3-h264-1080p.html

Handbrake makes flawless 1080p vids that play even on the iPad 2. You need to view about 1 ft from the screen to benefit from 1080p, though. If you are any further away you might as well encode to 720p. I encode to 1080p because I can also watch the vids on my laptops which have bigger screen.

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